Court of Appeals Second District of Texas Fort Worth
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COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH NO. 02-13-00349-CV ALLEGIANCE EXPLORATION, LLC, APPELLANTS ENEXCO, INC., CENTENNIAL GROUP, LLC, AND KINGSWOOD HOLDINGS, LLC V. CHARLES CHANDLER DAVIS, APPELLEES FABDA, INC., THOMAS M. MCMURRAY, AS TRUSTEE OF THE TMM FAMILY TRUST, AND NASA ENERGY CORP. A/K/A NASA EXPLORATION, INCORPORATED ---------- FROM THE 16TH DISTRICT COURT OF DENTON COUNTY TRIAL COURT NO. 2011-10854-16 ---------- MEMORANDUM OPINION1 ---------- 1See Tex. R. App. P. 47.4. This summary judgment appeal involves three successive mineral leases on a tract of land, multiple conveyances of the leased property, and one gas well. The dispute among the parties is about which of the three leases are still live. The appellants—Allegiance Exploration, LLC; Enexco, Inc.; Centennial Group, LLC; and Kingswood Holdings, LLC (collectively the Allegiance parties)— all argue that the third lease is in effect and that the prior two leases terminated by their own terms. The appellees—Charles Chandler Davis; FABDA, Inc.; Thomas M. McMurray, as trustee of the TMM Family Trust (TMM); and NASA Energy Corp. a/k/a NASA Exploration, Incorporated (NASA)—argue that the third lease is ineffective. In four issues, the Allegiance parties argue that the trial court erred by granting summary judgment for NASA, Davis, FABDA, and McMurray and by failing to render certain declarations in favor of the Allegiance parties. Because we hold that the trial court erred by granting summary judgment and by not rendering the requested declarations, we reverse the trial court’s judgment. A. Background The dispute in this case arose out of Davis’s and McMurray’s attempts to have declared void a lease that Allegiance signed with FABDA. Due mainly to acts taken by Davis and, to a lesser extent, McMurray, the factual background and procedural history of this case is not short. 2 Property is conveyed to FABDA, which executes the three leases at issue in the case In 2000, FABDA became the owner of real property in Denton County. FABDA stands for “Friday Afternoon Beer Drinkers Association.” Davis is chairman and a director of FABDA. FABDA has no employees, and the only people involved in the management or operation of FABDA are Davis and his ex- wife. The property at issue is a tract of 4.61 acres (the FABDA tract or the Property) in Denton County. On April 20, 2000, Owen Charles Davis, acting as trustee of the Davis Family Trust, conveyed the Property to FABDA. The deed stated that it is subject to any previously filed reservations and exceptions to the extent they were still in effect, but it contained no new reservations or exceptions. The deed does not specifically mention any previous conveyances of any part of the mineral estate, or indeed any specific reservations or exceptions at all. The record does not explain what Owen’s connection is to FABDA, though his last name suggests a relation to Appellee Davis. At some point, ownership of part of the Property’s mineral estate was conveyed to other parties besides FABDA, but the record does not make it clear when in the chain of title that occurred. The ownership of the FABDA tract’s mineral estate was at the time of these proceedings shared among a number of people, but which people and what percentage they own apparently varies across the Property. From what we can determine in the record, at the time of 3 the proceedings in this case, the mineral ownership of the western 3 acres of the Property differs from the mineral ownership on the eastern 1.6 acres. The Allegiance parties alleged that for part of the FABDA tract, FABDA owned an undivided one-half of the mineral estate, with the other undivided half owned by Christopher M. Watts and four others, each of whom also owns other property abutting the FABDA tract. From McMurray’s petition, it appears that the Watts ownership applied to the western three acres. In 2010, Watts and the four others executed oil and gas leases with Centennial Group (the Watts leases), which then assigned the leases to Allegiance, Enexco, and Centennial. The leases cover more acreage than is contained within the FABDA tract, and the Allegiance parties pled that these leases covered the FABDA tract and lands abutting it. McMurray further pled that, as for the remaining 1.6 acres of the Property, other individuals owned 1/16th of the mineral estate and that the well completed by the Allegiance parties on the tract (and at issue in this case) is located on that 1.6 acres. The Allegiance parties for their part pled that “part of the FABDA [t]ract is or may be owned by various other individuals, included but not limited to” individuals who had, between 2009 and 2011, executed oil and gas leases with Kingswood Holdings. It is not clear from the record whether these leases included the minerals owned by these individuals under the FABDA tract or only minerals on adjacent properties. The Allegiance parties refer to these leases as the “Fritz leases,” and we shall do the same. 4 Kingswood Holdings assigned the Fritz leases to Allegiance, Enexco, and Centennial. The Fritz leases and the Watts leases were all executed after the three leases at issue in this case were signed. Davis, on behalf of FABDA, executes three different leases on the FABDA tract Between 2005 and 2008, Davis, on behalf of FABDA, executed three separate leases covering the Property. Lease number 1: the NASA lease. Davis signed the first of the three leases in March 2005.2 NASA was the lessee. We will refer to this lease as “the NASA lease.” The NASA lease had a primary term of one year. Also in March 2005, NASA signed a certificate of pooling authority, and that certificate listed a lease with FABDA covering 3.61 acres. A file stamp on the certificate shows that it was filed with the Wichita Falls Oil & Gas Division of the Railroad Commission in January 2009 and filed with the Railroad Commission in Austin in March 2009 (after FABDA had signed the other two leases at issue in this case). The NASA lease covered all 4.61 acres of the FABDA tract, and we cannot tell from the record whether the certificate misstates the acreage or if it refers to some other lease. In August 2005, NASA filed a permit application with the Railroad 2See Glover v. Union Pac. R. Co., 187 S.W.3d 201, 213 (Tex. App.— Texarkana 2006, pet. denied) (observing that “[o]wners of undivided portions of oil and gas interests are tenants in common” and that “[a]bsent an agreement to the contrary, a cotenant has the right to lease his or her interest without joinder of other cotenants”). 5 Commission for a well on the Property. The Commission granted the permit in September 2005. In May 2006 (several months after the end of the NASA lease’s primary term), drilling operations were conducted on the property, and although a well— the Piper No. 1 well—was drilled, it was not completed. The operator conducting the operations was listed as G & F Oil, Inc., not NASA. Other reports filed with the Commission about operations on the wellbore listed an entity called Saddle Creek as the operator. It is undisputed that at the end of the NASA lease’s primary term in March 2006, there was no completed well on the property. FABDA was a co-owner of Saddle Creek Energy Development, L.P. According to an affidavit Davis executed in 2008 (which was recorded by Allegiance’s attorney in March 2010), Davis had acted in a management capacity with Saddle Creek. Davis swore in the affidavit that Saddle Creek caused the Piper No. 1 well to be drilled, that Saddle Creek outsourced operation duties for various wells (including the Piper No. 1 well) to Ventana (another entity that Davis had an ownership and management interest in), and that although the Piper No. 1 well had been drilled and cased, it had not been completed. Lease number 2: the Pritchard lease. At some point, Saddle Creek filed for Chapter 11 bankruptcy. According to an assignment executed by McMurray on Saddle Creek’s behalf, the bankruptcy court appointed McMurray as reorganization officer for Saddle Creek. In that capacity, on April 7, 2008, McMurray caused Saddle Creek to transfer to himself a one percent working 6 interest in the Piper No. 1 well and one percent of the leases covering the acres surrounding the well bore. The assignment stated that it was done in compliance with an order of the bankruptcy court. The NASA lease was included in that assignment. The assignment does not indicate how Saddle Creek had the authority to assign an interest in a lease executed by FABDA. In connection with Saddle Creek’s bankruptcy, on May 28, 2008, Davis signed on FABDA’s behalf the second oil and gas lease on the Property. The lessee was Gregory Pritchard, as trustee of the bankruptcy estate of Saddle Creek. We therefore refer to this lease as “the Pritchard lease.” In January 2009, Mark Weisbart replaced Pritchard as the trustee for Saddle Creek’s bankruptcy estate. The Pritchard lease acknowledged that FABDA had previously signed a lease with NASA, but it avoided making any representations about the NASA lease’s continuing validity. Specifically, the Pritchard lease stated, “This lease may be subject to [the NASA lease]. [Pritchard as trustee] makes no representations as to the validity of the [NASA lease]. [FABDA] covenants and agrees not to extend, renew, amend, or modify the [NASA lease].” [Emphasis added.] The Pritchard lease had a primary term of three years “and for as long thereafter as [1] oil or gas .